UK DB Plans Closed, More to Follow

According to the survey of 269 UK public and private
pension plans, the situation is direr at the small end of
the market with a third of small plans, those with assets
up to £50 million, shuttered.

The 2002 Survey of Occupational Pension Plans published
by The Pension Fund Partnership and MRM Projects Limited
predicts that 20% of companies still running a DB plan next
year will close its doors to new employees.

Funding

Also, the study said that corporate bills for DB company
contributions are more than 14% of a firm’s salary pool – a
2% rise from last year.

When looking at the plans’ funding position, 25% of
respondents have a funding level of below 100%. The average
equivalent funding position for the public sector plans is
even worse. More than half of public plans are less than
100% funded, including 30% that are less than 90% funded,
the study said.

In addition, various aspects of legislation are seen as
the major challenges facing the pension industry. The
complexity of pension law, mentioned by three quarters of
respondents, and its intrusiveness, cited by one third, are
compounded by “the unpredictability of government
decisions”, noted by almost half the plans.

Further Findings

The survey also revealed that:

in addition to the cost of basic funding, over 40% of
plans are now concerned about the expense of running the
plan,

over half the plans are also concerned about the
introduction of the new FRS17 Accounting Standard, which
sets down the way in which pension liabilities must be
reported in company accounts, and

over a quarter of companies with defined benefit
plans have now also established defined contribution
plans for part of their workforce.